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Treasury Institutes Small Business Lending Incentive
By Bizbox
We reported two weeks ago that it looked as though some more direct encouragement for banks to increase lending in the wake of the government's massive capital injection might be in the offing. The effort the Treasury Department and Federal Reserve were concocting may have come today, with the announcement that there is as much as $200 billion up for grabs for investors who in turn wish to lend it out for credit card, auto, and student loans--and loans backed by the Small Business Administration.
Specifically, the plan will see the Fed will be lending up to $200 billion to owners of securities that are backed by such loans. The program is made possible--in the event that the lending program produces losses--by $20 billion taken from the $700 billion allocated by Congress for the broader bailout.
The theory is that the new money will grease the lending wheels regarding those specific classes of loans. Perhaps, along with the SBA's recently announced slackening of loan rules, the program will help pull 7(a) lending out of its current, dismal slump.
Sharon McLoone reports that Rep. Nydia Velazquez (D-N.Y.), the chair of the U.S. House Small Business Committee, expressed support for the effort while insisting, "More needs to be done."
Comments (0)November 25, 2008 12:59 PM
